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January 7, 2009

UK: M&S to shut 27 stores; 1,200 jobs under threat

Marks and Spencer plans to close 27 stores and cut over 1,200 jobs as it looks to slash costs from the business after seeing sales slump over the last three months.

Marks and Spencer plans to close 27 stores and cut over 1,200 jobs as it looks to slash costs from the business after seeing sales slump over the last three months.

The UK retailer said today (7 January) that it would shut 25 Simply Food convenience stores and two “small main chain” outlets. The closures will lead to the loss of 780 jobs, while M&S has earmarked a further 450 head office posts to go.

Chairman Sir Stuart Rose said the prospect of a “challenging” economy over the next year meant the moves were necessary.

“Given that we expect challenging economic conditions to continue for at least the next 12 months we believe we are taking the right action to maintain the strength of our business,” he said.

M&S has suffered in recent months as UK consumers rein in their spending and the retailer continued to see sales fall during its third quarter.

UK like-for-like sales were down 7.1% during the 13 weeks to 27 December, with comparable food sales falling 5.2%.

Nevertheless, M&S insisted the moves it had taken to improve its food sales had paid off and pointed to a “record” trading day on 23 December when it enjoyed sales of over GBP50m (US$74.1m).

Group sales were down 1.2%, with UK sales 3.4% lower on the year. Food sales dipped 1.1%. Sir Stuart said M&S had made “good progress”.

“Our trading stance throughout the quarter enabled us to offer our customers great value, grow our volumes, maintain our leading market position and uphold our ethical stance,” he said.

“Food showed an improved trend quarter on quarter, reflecting the initiatives put in place around better values, promotional stance, innovation, increased availability and reduced waste.”

During the 13 weeks to 27 September, UK like-for-like food sales had fallen 5.9%. On a reported basis, food sales were down 0.5%.

Nevertheless, Sir Stuart said M&S’s greater focus on promotions would hit margins for the company’s fiscal year.

“UK retail gross margin for the full year is now expected to be around 175 basis points lower than last year as a result of increased promotional activity and our decision to invest in price for the benefit of our customers, especially in food,” he said.

Internationally, M&S said sales grew 26.9% during its third quarter.

In early trading, M&S shares were up 7.96% at 257.75p at 09:42 GMT.

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